← Money Rehab with Nicole Lapin
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Nicole Lapin
It is time to start thinking about holiday shopping and I'll let you in on a little secret. Get everyone on your list Something special from Justin Wine Justin is legit my favorite wine to give and to receive. With a rich history of accolades, Justin produces exceptional wines and is proud to be America's number one luxury cabernet. Since 1981, Justin has been producing world class Bordeaux style wines from Paso Robles on California's Central Coast. As a pioneer of Paso, Justin wines are what put Paso Robles on the winemaking map. Justin offers curious gift sets, library wines, magnums and even custom etched bottles. You can personalize the gifts with a custom message icon or logo. Go to justinwine.com and enter code MONEY20 at checkout for 20% off your order. Justin offers the perfect holiday gifts for clients, colleagues, family and friends. If you're looking for a special wine to serve at your holiday table, try Isosceles, that's Justin's flagship Bordeaux style red blend. Whether you're a first time wine drinker or a wine aficionado, Justin has a wine for everyone, every occasion and every celebration. Be sure to check them out@justinwine.com and receive 20% off your order for a limited time. I'm Nicole Lapin, the only financial expert. You don't need a dictionary to understand it's time for some Money rehabilitation. There's a really important overlap between family planning and financial planning in the bookstore. These genres are of course separate, but after going through this myself, I can honestly say they should be in the same section. I personally have spent tens of thousands of dollars trying to have this baby and I think I'll talk about it at some point. But for now I'm thinking a lot about a DM that I got about budgeting for a baby, and because that is so top of mind for me right now, I wanted to go ahead and answer it. As I mentioned yesterday, this will be my last episode of Money Rehab before going on maternity leave. But if you missed that episode yesterday, don't worry, Money Rehab is still going to be here for you every single day while I'm out. The show is going to be guest hosted by some of the smartest people I know in business and personal finance, like Tracy D'Annunzio, who built and sold the luxury resale company Tradesy Peter Tuchman, who you know and love as the stockbroker on the floor of the New York Stock Exchange, and a fellow Eminen podcast host Minda Hartz, who's the bestselling author of the Memo and is an expert on workplace culture. Moshwinunu, who's been a journalist for 500 years. He hosts my favorite daily news podcast, Mo News, which is actually joining the Eminen family. Yay. Claire Wasserman, who is an expert on pay negotiation real estate extraordinaire. John Grauman, attorney, but a very cool one. Pamela Moss, who you probably know from Instagram as law mother and our very own ep Morgan Lavoy and more. And if you think you'll miss me too much, do not worry. You will hear my lovely voice very soon. Even while I'm on. Hope you love it. Even while I'm on mat leave. I have some spas special episodes that I have taped but I haven't shared yet. Like the listener intervention that I'm doing with bank of America on the financial topics that matter the most on your road to financial independence. And some special holiday episodes that you'll hear closer as we get to the end of the year. I wanted to try and give myself and my husband some time with our daughter, but I also wanted to make sure that your days would still be full of stories and tips and tricks to make your money work harder for you. And I think you're really going to like this. But don't like it too much because I will be back here very soon. You cannot get rid of me, fam. So with that, let's talk about babies. I knew that babies were expensive, but I didn't know how expensive until I got pregnant and I haven't even given birth yet. So I love that money. Rehabbers are reaching out with questions about financing a family because you should budget for baby Alyssa DM just with this question.
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Alyssa
Hi Nicole, My name is Alyssa. I'm 28 and I'm currently pregnant with my first child. My question is simply, how do you budget for a baby and how do you plan for all those unexpected costs during the pregnancy and postpartum? I currently have to get ultrasounds way more often than I'm expected to because I'm considered high risk and that's a cost I didn't plan for. So now I'm not sure exactly where that money's going to come from. So how do you do it? How do you budget for all of that?
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Nicole Lapin
Now this DM is from an older episode and since then prices have only gotten higher. There are a lot of costs to consider when growing your family before there's even a baby to budget for. There are medical costs which can get really expensive depending on how you're growing your family. But for the purposes today, I'm only going to talk about what to financially expect when you're expecting. My advice is different if you're a few years away from having kids, if you're considering freezing your eggs or trying ivf, for example, Alyssa, if you came to me in your pre pregnancy days, I would have recommended that you bolster your emergency fund so that you would have a bit more of a cushion to help with these unforeseen costs like these ultrasounds. But today I'm going to be talking to people in Alyssa's and my own shoes. You are expecting as in you have a due date or an adoption date someday marked on your calendar where you're going to have a new roomie in your home that no longer has any hard corners. Babies are tiny, babies are cute. And yet there is nothing tiny and cute about the way baby will affect your spending plan. According to LendingTree, the average cost of raising a kid from birth to 18 years old costs parents 230 $37,482. That is the exact average from all 50 states. Of course, there are a bunch of different factors that affect how much people spend on their kids, where they live, whether they're raising a kid with a partner, whether their baby has a medical condition, how many kids they already have, to name a few. The least expensive state to raise a kid is South Carolina. That's where it still costs a significant $169,000. The most expensive state, surprisingly, is Hawaii, which costs parents around 314,000. But on average that means that parents are spending $19,800 a year on their kid. And that doesn't include the cost of actually giving birth or the potential cost of college. I am not saying this to scare you or to freak you out. I tell you this because I think we have a responsibility to speak up more about these costs and few financial experts do. We've definitely covered why you should budget for baby, but let's talk about the how. Here are six things you should do when you're expecting. Number one, if your health insurance isn't great, move on to bigger and better plans. This definitely should help with Alyssa's question around unexpected medical costs and if you have a higher risk pregnancy and need extra medical support. Some health insurance providers are much more baby friendly than others. Some plans cover immunizations, co pays and coinsurance fees, while others don't. Some plans even cover more granular costs. For example, the Affordable Care act requires some insurance plans to cover breastfeeding support like a lactation consultant and breast pump. So ask yourself, does your health insurance plan have you covered? If not, it could be time to switch. Typically, you can only change insurance plans during the open enrollment period unless there's a qualified life event that warrants the change. And having a baby definitely meets that criteria. So you don't have to wait until open enrollment to glow up your health insurance plan. Number two Claim a child tax benefit. You will have increased costs when you're a parent. That is just a fact. But you will also have a new opportunity to get some tax love this year. If you're married and make less than a combined $400,000 a year, or if you file your taxes solo and make less than 200 grand, you can get a $2,000 tax credit per child. If you make more than that, you still might be able to take some of that amount as a tax credit. It just becomes less and less depending on your income. I linked more info in the show notes so you can check out your eligibility go ham on your registry. I just discovered this myself, but some registry sites, including Amazon and Pottery Barn Kids give a discount if you yourself purchase any of the items that no one else buys you from your registry. So don't get registry insecure and leave leave items off the list that you don't want people to know you want. I literally put everything I could possibly think of on my registry because if nobody else gets it for me, I'll just get it myself with a discount. Number four set up a 529 plan. 529 plans are special investment accounts designed to help guardians afford educational costs for their kids. The most popular kind of 529 plan is the savings plan. With a savings plan you pay tax on what you contribute, like with a Roth ira, but withdrawals are tax free if they're used for qualified educational expenses like tuition, room, board and so on. Plus, in some states you might be eligible to deduct your contribution from your state taxes. Tax advantaged accounts are almost always the move, but especially when it comes to college which is so expensive and with a looming student debt crisis. Do this asap. Also, if your kids don't end up going to college, 529 plans can now be used for retirement as well. Number five Call Uncle Sam. While the US is not very progressive relative to other countries when it comes to parental support, there is some out there. I'll link to the website in the show notes where you can go to get a financial support from the government. Number six make a separate savings account for baby expenses. That 237,482 figure is over 18 years and that is a lot. But you don't need to earn 200 grand in order to have 200 grand. There are high yield savings accounts that can help your money grow at 4ish percent, much better than the standard savings account which will earn you less than 1%. So I would strongly, strongly recommend keeping a separate account that you use only for baby expenses. Tons of psychological research out there suggests that if you do keep separate sub savings accounts for your financial goals, you're more likely to reach them today. I don't have any tips that you can take to the bank. I just want to say thank you. Like you heard me say yesterday. This show, this business is my first baby and I wouldn't have been able to do any of this without you. I am so excited for this next chapter and I am especially grateful that you are coming along with me. I'll be back on Money Rehab very soon. My dear Money Rehabbers, please don't miss me too much. But in the meantime, try not to do anything with your wallet that I wouldn't do. Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoy. Our researcher is Emily Holmes. Do you need some Money Rehab? And let's be honest, we all do. So email us your Money questions money rehaboneynewsnetwork.com to potentially have your questions answered on the show or even have a one on one intervention with me. And follow us on Instagram, MoneyNews and TikTok MoneyNewsNetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.